Outlook: The energy complex continues to push higher this morning, as crude prices have hit the highest level since January 2020. Strength in the market continues to stem from familiar places. Anticipated tightness in global crude supplies due in large part to OPEC+ compliance has continued to buoy prices. Vaccine headlines have also been quite supportive in the last few days. Johnson & Johnson has applied for an emergency use authorization from the U.S. Food and Drug Administration. J&J released clinical data last week and showed that their single dose Covid-19 vaccine was 66% effective in protecting against the virus. The J&J vaccine was also 100% effective in preventing hospitalizations. The FDA has signaled that they would give authorization to a vaccine that was at least 50% effective and proven to be safe. The FDA has scheduled a meeting of its Vaccines and Related Biological Products Advisory Committee on February 26 to discuss the emergency use application from J&J. It seems likely the vaccine will be approved for emergency use, and likely would begin shipping sometime in early March. Stimulus headlines are also providing an additional layer of support, as Senate Democrats have passed a budget resolution earlier this morning. By pushing the coronavirus relief bill through the reconciliation process, it would allow the bill to pass with just a simple majority. The bill was sent back to the House as some changes were made, but it is expected the House will vote on it for a second time later today. Equities have started the day slightly mixed, as the DJIA and the S&P 500 are both holding onto gains, while the Nasdaq Composite has traded both sides of even.
Crude
- The U.S. Department of Labor released its jobs report for January and showed that nonfarm payrolls increased by 49,000. They also showed that the unemployment rate fell to 6.3%. Economists surveyed by Dow Jones anticipated job growth to increase by 50,000. Citigroup had projected a gain of 250,000 jobs however.
- Brent crude has also hit its highest level in a year this morning, and is closing in on $60 per barrel. The global crude contract is on track to rise about 6% this week.
- The Chairman of India’s state-run Hindustan Petroleum Corporation has stated that the country would resume imports of Iranian crude oil if sanctions from the U.S. were lifted. India was the second largest importer of Iranian crude before the country stop all imports due to pressure from strict U.S. sanctions. The Biden administration has signaled a willingness to bring Iran back to the table to resume the 2015 nuclear accord. Iranian government officials have also seemed willing to rejoin the agreement.
- According to data from Bloomberg, Kazakhstan’s compliance under the OPEC+ agreement was 111% in January. Some of the output capacity in the country was shutdown during the month due to power outages, signaling that tighter compliance wasn’t necessarily by choice. Kazakhstan will be allowed to increase production by 75,000 bpd in February and March.
- Today at noon CST Baker Hughes will release its weekly Rig Count Report. In the previous report they showed that U.S. producers added 6 oil rigs, bringing the total up to 295. Rigs have steadily risen for several weeks in a row, but are still down 406 from last year at this time.
- This afternoon the CFTC will release its weekly Commitments of Traders Report. We’ll dive into those results in Monday morning’s commentary.
- The March crude oil contract is trading $0.77 higher at $57.00. The 20-day and 100-day moving averages are $53.41 and $45.44, respectively. The 14-day RSI is 75.85%. An RSI above 70% indicates an overbought market from a technical perspective.
- As of 9:55 am CST: April Brent is up $0.72 at $59.56, the U.S. dollar index is 0.392 lower at 91.137, while the nearby e-mini S&P 500 futures contract is up 15.25 points at 3,879.75.
Diesel
- The March ULSD contract is trading $0.0263 higher at $1.7268. The 20-day and 100-day moving averages are $1.6191 and $1.35657, respectively. The 14-day RSI is 79.87%.
- Air travel continues to see very weak demand. According to TSA checkpoint data, 778,065 passengers went through U.S. airport security on Thursday. That compares to over 2.165 million in 2020, which signals a decrease in demand of about 65% in a year-over-year comparison. Air travel demand will likely continue to be quite weak through much of the year.
Gasoline
- The March RBOB contract is trading $0.0149 higher at $1.6597. The 20-day and 100-day moving averages are $1.5700 and $1.3031, respectively. The 14-day RSI is 76.23%.
- Ford Motor Company has announced that they will increase investment in electric and autonomous to $29 billion through 2025. The announcement comes as General Motors released its own plan to increase spending on all-electric vehicles to $27 billion between 2020 and 2025. Ford is expected to release an all-electric F-150 pickup for model year 2022.
Propane
- Propane prices are moving higher this morning. At last look Conway was up $0.0225, trading at $0.8900. Mt Belvieu was up $0.0250, trading at $0.8700.
- The NOAA is showing in both its 6-10 day and 8-14 day forecasts that significantly colder weather is expected for the majority of the country. That cold weather should boost home heat demand for propane and provide a layer of support to prices. Temperatures here in the Twin Cities are expected to be near 0 for a high for about the next week.
Natural Gas
- The March Natural Gas contract is trading $0.033 higher at $2.968. The 20-day and 100-day moving averages are $2.683 and $2.864, respectively. The 14-day RSI is 64.19%.
- Yesterday the EIA released its Weekly Natural Gas Storage Report. They showed that working gas in storage fell 192 Bcf in the week ending January 29. Natural gas inventories are 198 Bcf above the five year average.
